First-quarter earnings results from the big banks are clearly better than they have been. Even though the banks earned 20% less in Spain due to paltry foreign investment, overall business has improved.
Interest rate margins are up 3% to 4.8 billion euros, which is critical because this is a core profit zone for the banks. Interest rates on cash deposits were undermining bank profits in 2012 and at the beginning of 2013, but a deposit war among the banks has driven down these rates. Another positive factor is that mortgage defaults seem to have tapered to a standstill. This is the first step toward getting credit flowing again, although banks will take on less risk this time around so that they can stay solvent.
